Summary
- iM Securities said the Kospi index and the Nasdaq posted strong gains this year, while major cryptocurrencies including Bitcoin and Ether showed a clear decline.
- The report said Coinbase was hit directly by a sharp drop in revenue, a net loss, and a 54%% slump in retail trading volume, undermining its spot-trading-focused revenue model.
- Yang Hyun-kyung, an analyst at iM Securities, said domestic exchanges are vulnerable because of their fee-based revenue structure and strict regulatory environment, making trading volume declines and investment sentiment the key variables for earnings.
Global stock markets have continued to rally on enthusiasm over artificial intelligence and semiconductors, but the digital-asset market has remained mired in a downturn. Pressure is also building on South Korean exchanges, which have little room to diversify revenue, as Coinbase, the largest US crypto exchange, posted a sizable loss and began cutting about 700 jobs.
In a May 12 report, iM Securities said the Kospi had jumped 77.9% this year and the Nasdaq had risen 14.8%. Major cryptocurrencies moved in the opposite direction, with Bitcoin down 9.1% and Ether off 22.2%.
The slide in digital assets has directly hurt exchange earnings. Coinbase posted $1.41 billion in revenue in the latest quarter, down 21% from the previous quarter, and swung to a net loss of $390 million. Retail trading volume, its main source of revenue, plunged 54%, hitting its spot-trading-focused business model.
After the earnings miss, Coinbase announced plans to cut about 700 jobs while pushing to broaden its revenue base. It is trying to reduce its dependence on spot trading through the acquisition of derivatives exchange Deribit and expansion into businesses including the stablecoin USDC and payment networks for AI agents.
South Korean crypto exchanges, by contrast, have few obvious options. As sentiment toward digital-asset investment cooled, average daily trading value this year fell 44.0% at Upbit and 48.2% at Bithumb from the second half of last year. Coinone and Korbit sought a rebound through fee-free trading and other promotions, but volumes weakened again after those events ended.
Experts say the weakness of South Korean exchanges stems from the country's strict regulatory environment. Institutional trading, spot exchange-traded funds, stablecoins and derivatives trading are all effectively blocked under the current system. Yang Hyun-kyung, an analyst at iM Securities, said domestic exchanges still rely overwhelmingly on fee income, meaning lower trading volume feeds directly into earnings pressure. For now, broader crypto-market sentiment will be the key factor determining performance.
